We received production approval for Candesartan from the SFDA in November 2012 and plan to start production in the first quarter of fiscal 2013. Candesartan is an angiotensin II receptor antagonist serving as a first-line treatment for hypertension.

On October 30, 2012, we entered into a revolving line of credit with a bank in the amount of RMB30,000,000 (approximately $4.75 million).

Revenue was $12.2 million for the third quarter of 2012, representing a decrease of 42% compared to $21.0 million for the same period in 2011. For the first nine months of 2012, revenue was $42.9 million, representing a decrease of 27% from $58.7 million for the same period in 2011.

Gross profit was $3.2 million for the third quarter of 2012, representing a decrease of 57% compared to $7.5 million for the same period in 2011. For the first nine months of 2012, gross profit was $12.7 million, representing a decrease of 41% from $21.7 million for the same period in 2011.

Net income was $1.3 million, or $0.03 per basic and diluted share for the third quarter of 2012, representing a decrease of 74% compared to $5.0 million for the prior year period, or $0.11 per basic and diluted share. For the first nine months of 2012, net income was $5.9 million, representing a decrease of 61% from $15.1 million for the same period in 2011.

"We are excited to receive the SFDA's production approval for Candesartan in November. We believe this drug will bring positive impact on our current existing product line which has been significantly influenced by the Healthcare Reform and its associated pricing pressure in the recent quarters," Ms. Zhilin Li, China Pharma's Chairman and CEO continued, "We have adjusted our general sales and credit policies to a conservative stance since the beginning of this year in order to control and improve the growing accounts receivable, and ensure the capital requirements for new GMP upgrading requirements are met. Per those mandatory requirements, the upgrading of our dried power injectable line and liquid injectable line must be completed by the end of 2013. We have completed the planning, design and an environment contamination evaluation, and commenced construction relative to certain required facilities and equipment."

Third Quarter of FY2012 Results of Operations

Revenues for the quarter ended September 30, 2012 were $12.2 million, a decrease of $8.8 million, or 42% from $21.0 million for the quarter ended September 30, 2011. The revenue decreased mainly because the implementation of the ever-changing Healthcare Reform policies and the associated pricing adjustment. In addition we reduced our sales-on-credit in order to control our accounts receivables. As a result, sales decreased in three out of our four major product categories.

Most of the decline was from our CNS Cerebral & Cardio Vascular category where sales fell by $4.0 million, or 56% to $3.2 million from $7.2 million for the quarter ended September 30, 2012. Shortfalls in sales of Ozagrel Sodium for Injection and Buflomedil Hydrochloride were major contributors for the decline. Sales in the Anti-Viro/ Infection & Respiratory category fell by $3.1 million or 37% to $5.1 million from $8.2 million in the prior year period. The "Digestive" category sales revenues edged lower by $2.0 million, or 62% to $1.2 million from $3.2 million in the same period prior year. This was mainly because sales across this category were significantly influenced by the NDRC's price adjustment targeting digestive drugs specifically in the first half of this year. Sales of "Other" category increased by $0.2 million, or 8% to $2.5 million from $2.3 million in third quarter of 2011.

Gross profit for the three months ended September 30, 2012 was $3.24 million, which was 56.8% lower compared to $7.51 million in the third quarter of 2011. Our gross margin for the third quarter of 2012 was 26.6%, compared to 35.8% in the corresponding quarter of 2011. Price controls plus rising pharmaceutical materials costs have been squeezing our profit. We expect current challenging pricing environment to persist for some time.

In terms of our gross margins by major categories, Anti-Viro/Infection & Respiratory category was 28% in the third quarter of 2012, compared to 24% in the third quarter 2011 and 26% in the second quarter of 2012. Gross margin for our CNS Cerebral & Cardio Vascular category margins was 23% in the third quarter of 2012, compared to 43% in the third quarter 2011 and 30% in the second quarter of 2012. Gross margin for our Digestive Diseases category was 36% in the third quarter of 2012, compared to 45% in the third quarter 2011 and 28% in the second quarter of 2012. And gross margin for our Other category was 23% in the third quarter of 2012, compared to 42% in the third quarter 2011 and 34% in the second quarter of 2012.

Selling, general and administrative expenses in the third quarter of 2012 were $1.45 million, compared to $1.63 million, in the same period of 2011. Fixed expenses and the spending on market maintenance and development in selling, general and administrative expenses made this item decrease less than sales did.

Operating income was $1.6 million in the third quarter of 2012, down 73% from $6.0 million in the third quarter of 2011. The decrease in operating income was mainly due to lower gross revenue, gross profit and higher bad debt expense partially offset by lower selling and general administrative expenses in the current period compared to the corresponding quarter one year ago.

For the quarter ended September 30, 2012, the Company paid income tax at a rate of approximately 15%. Income tax expense for the third quarter of 2012 was $0.24 million, compared to $0.93 million for the same period last year. The Company obtained "National High-Tech Enterprise" status from the PRC government in the fourth quarter of 2010. With this designation, the Company is entitled to a preferential tax rate of 15% for three years from 2011 to 2013, which is notably lower than the statutory income tax rate of 25% for corporations in China.

Net income for the third quarter of 2012 was $1.3 million, or $0.03 per basic and diluted share, compared to $5.0 million, or $0.11 per basic and diluted share, in the third quarter of 2011. The main reasons for the decrease in our net income are the decrease in sales revenue, falling gross margins and higher operating expenses.

Nine months Results

Revenues for the nine months ended September 30, 2012 were $42.9 million, down 27% from revenues of $58.7 million for the nine months ended September 30, 2011. Gross profit for the nine months ended September 30, 2012 was $12.7 million, down 41% from gross profit of $21.7 million for the corresponding period of 2011. Gross margin was 29.6%, compared to 36.9% for the first nine months of 2011. Operating income was $7.2 million, down 58% from $17.1 million for the first nine months of 2011. Net income was $5.9 million, or $0.13 per basic and diluted share, compared to $15.1 million, or $0.35 per basic and diluted share, for the same period a year ago.

Financial Condition

As of September 30, 2012, the Company had cash and cash equivalents of $5.1 million compared to $4.1 million as of December 31, 2011.

Working capital increased to $102.2 million at September 30, 2012 from $96.8 million at December 31, 2011. The current ratio decreased to 7.2 times at September 30, 2012 from 8.0 times at December 31, 2011.

Accounts receivable balance rose to $69.8 million at the end of the third quarter of 2012 from $69.7 million at the end of 2011; which also represents a decrease of $1.7 million compared to $71.4 million as of June 30, 2012. The Company's management team continues to be sharply focused on improving accounts receivable collection and expects to make progress in the quarters to come.

For the nine months ended September 30, 2012, cash flow from operating activities was $3.0 million, as compared to $3.6 million as of December 31, 2011; which represent an improvement from $1.9 million as of June 30, 2012.

Conference Call

The Company will hold a conference call at 8:30 am ET on November 15, 2012 to discuss third quarter of year 2012 results. Listeners may access the call by dialing 1-866-519-4004 or 65-672-393-81 for international callers, Conference ID # 65749586. A webcast will also be available through CPHI's website at http://www.chinapharmaholdings.com. A replay of the call will be accessible through November 23, 2012 by dialing 1-855-452-5696 or 61-281-990-299 for international callers, Conference ID # 65749586.

About China Pharma Holdings, Inc.

China Pharma Holdings, Inc. is a rapidly growing specialty pharmaceutical company that develops, manufactures and markets a diversified portfolio of products focused on conditions with a high incidence and high mortality rates in China, including cardiovascular, CNS, infectious, and digestive diseases. The Company's cost-effective, high-margin business model is driven by market demand and supported by eight scalable GMP-certified product lines covering the major dosage forms. In addition, the Company has a broad and expanding nationwide distribution network across all major cities and provinces in China. The Company's wholly-owned subsidiary, Hainan Helpson Medical & Biotechnology Co., Ltd., is located in Haikou City, Hainan Province. For more information about China Pharma Holdings, Inc., please visit http://www.chinapharmaholdings.com. The Company routinely posts updated information on its website.

Safe Harbor Statement

Certain statements in this press release constitute forward-looking statements for purposes of the safe harbor provisions under The Private Securities Litigation Reform Act of 1995. Any statements set forth above that are not historical facts are forward-looking statements that involve risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements, which may include, but are not limited to, such factors as the achievability of financial guidance, success of new product development, unanticipated changes in product demand, increased competition, downturns in the Chinese economy, uncompetitive levels of research and development, and other information detailed from time to time in the Company's filings and future filings with the United States Securities and Exchange Commission. The forward-looking statements made herein speak only as of the date of this press release and the Company undertakes no duty to update any forward-looking statement to conform the statement to actual results or changes in the Company's expectations except as required by applicable law or regulation.